A Tale Of Two Yahoo!s

When you hear news about Yahoo, it’s rarely good news. There’s layoffs, passwords getting stolen, declining profits, a CEO game of musical chairs, and so much more. When you read the comments on any Yahoo! news post, you also realize that every single one of their readers is crazy (or, at least, it seems that way). Basically, things aren’t going so well (unless you count the Mayer thing, then maybe that’s good).

But have you heard about Yahoo! Japan? If you are like most people, you probably assume that they’re the same company suffering the same woes, though you’d be wrong on both accounts. Yahoo! Japan is both its own separate company and it’s doing really, really well. They probably sometimes use their name to shout their excitement at all the yens they’ve amassed. Yahoooooo!

But how in the world did this happen? Is Japan some kind of Bizarro World where Doraemon is evil and Yahoo is a successful company? Half of that is true.

Yahoo! Japan

The Yahoo! Japan corporation was launched on April 1, 1996 (not an April Fools joke) as a joint venture between the Japanese giant Softbank and America’s Yahoo, becoming the first web portal in Japan. At the time, Softbank owned 60% of the company and Yahoo had 40%. Though the percent of ownership has gone down for both companies, Softbank currently owns a majority share at 35.45%.

Because of these percentages, Yahoo! America and Yahoo! Japan went their separate directions. Although they both are kind of the same company in that they do similar things and have a similar name, the leadership and ownership is not. On top of that, the customers are different too, but we’ll talk about that a bit later. While Yahoo! America is bleeding employees and revenues, Yahoo! Japan has been extremely profitable, with net profits climbing each year since its inception. In 2011 its profits were 92.2 billion yen ($1.16 billion) and revenues were 292 billion yen ($3.7 billion)†.

The logical question here is to ask “why?” How has Yahoo! Japan been so successful and popular while its older sibling is obviously that alcoholic older brother that you want to help but you know he can’t be trusted after the last time he took your rehab money and spent it on some Captain Morgans. I don’t think the answer is simple, but let’s give it a shot.

The Relationship

First I want to start with the relationship between the two companies. This is where it all begins and where it all separates. Yahoo! Japan was supposed to be another Yahoo and in many ways it is. The main difference, as I mentioned before, is the management and the userbase. They could politely listen to their minority share holder Yahoo, smile, bow a bit, and then do something completely different.

For example, when big brother Yahoo! America partnered with Bing to do all their search stuff, Yahoo! Japan partnered with Google instead. Although Yahoo isn’t really competing with Google (or they say they aren’t), Google was a big part of Yahoo! America’s decline in a lot of ways. The “web portal” became obsolete when a great search came along. Perhaps partnering with Google is a great idea for Yahoo! Japan. Time will only tell. But this is one of those things that really shows that these two companies do things differently.

Another interesting part of the relationship between the two is the ownership in the companies. Yahoo! America owns nearly 35% of Yahoo! Japan. This is worth a lot of money. In fact, this ownership is worth almost 20% of all of Yahoo! America’s value. It’s rumored that they’re considering selling this stock back to help finance restructuring efforts, though we’ll just have to see what Marissa Mayer decides to do with that. The thing is, though, after Yahoo! America’s fall, Yahoo! Japan is actually the big fish in the sea, though just by a little bit. Its market cap is 19.4 billion dollars, whereas Yahoo! America’s market cap is a slightly tinier $19.12 billion. That’s kind of ridiculous when you consider the size of the possible userbase, and shows you the kind of relationship they have right now.

Different decisions and different leadership have gotten Yahoo! Japan to this point… at least that’s what most people say. I actually think it’s the opposite. It’s not Yahoo! Japan that’s doing a particularly good job, it’s the customers and users that they have. I believe that essentially Yahoo! Japan just lucked out, but that luck won’t last forever.

The Yahoo! Japan Users

I’m going to take the controversial position in all of this and say that Yahoo! Japan hasn’t done much of anything to make themselves so successful. Okay, I take that back. They haven’t particularly made any decisions that were so far different from Yahoo! America that justifies their success. In a nutshell, I give Yahoo! Japan 5-10 years before it starts its Yahoo! America slide, despite larger and larger profits every single year since its creation. I mean, things look great for them right now… but I blame that on Japanese Internet users for not being on the cutting edge, at least when it comes to personal computers.

Who Are The Users?

Well, pretty much everyone. Yahoo! Japan is Japan’s #1 site according to Alexa. Nobody else really comes close. This means Yahoo! Japan has a long way to fall. You know what they say: “the bigger they are…”

But that’s not a good reason on its own. It’s who these users are that intrigue me.

10 Years Behind?

I feel like Japan’s just now getting into the “web revolution.” I’ve already said their web design is so 2003, but if you think about it that was a pretty good time in Internet history for us too. That’s when the old guard of the web started breaking up and “Web 2.0″ began to appear. History tends to repeat itself. Remember when Yahoo was number one in America, too? It wasn’t that long ago. From all that I’ve seen from Japanese Internet users, they’re getting close to this stage as well. Current Japan 2012 is pretty close to America’s 2002, in terms of the Internet. Like I said, in 5-10 years and I think we’ll see Yahoo! Japan follow in the same route. Koichidamus hath spoken.

Competition

Lastly, there’s the competition. This isn’t about the users, exactly, except that competition gives users more choice. Now, one of Yahoo! Japan’s key advantages has been the near lack of competition. If a lack of competition does anything to a big company, it makes it completely oblivious to said competition until it’s way too late. This is what happened with Yahoo! America as well, though it had AOL to fight with for the “portal’ space. Sadly, it wasn’t portals they should have been fighting over. Web portals were replaced by search, all kinds of fancy Web 2.0 things, and social, losing both of those companies millions of customers. Yahoo! Japan’s in the same situation. I don’t think they’ll know what hits them when the competition finally does appear.

So what should they be worried about losing?

Yahoo! Japan Products

Yahoo! Japan has a few flagship products that really stand out. But, are they products that will allow Yahoo! Japan to sustain itself in the long term?

Yahoo Auctions

Yahoo! Japan’s auction website is the largest in Japan. Think Ebay. That being said, where is Ebay America now? They’re heading towards the gutters. With sites like Amazon in America, people are actually able to buy many new things for cheaper than on Ebay. Even Ebay has been trying to transition to the “buying new stuff” game, but it’s too little too late. While auction sites traditionally do great for a while, other shopping sites eventually catch up and let you buy new items for cheaper (with better shipping options too… thank you Amazon Prime!). This is the way of the Internet. I don’t believe that Yahoo Auctions, despite being the biggest Auctions site in Japan, will be a huge part of their future. Especially with the country being so small, shipping times can get pretty good. Look out for Amazon Japan and Rakuten in the future, I think they’re just getting started.

Yahoo Chiebukuro (Pearls Of Wisdom)

Think “Yahoo Answers” outside of Japan. Sure, some people use that, but it’s gone downhill as other Q&A sites pop up and bring you higher quality questions and answers. It’s only a matter of time (see “competition” above) until other Japanese Q&A sites start to chip away, which means fewer users and less advertising revenue.

Yahoo Mail

Do companies make a lot of money on mail? Maybe. Even in America Yahoo mail is one of the top providers (I think it’s #1 or #2, actually, Gmail is below that). has that helped them much? It doesn’t seem like it. Yahoo! Japan’s planning on monetizing email like Google is by scanning your email for keywords and advertising to you, but I’m not sure if that’ll be a big enough gain for them.

Yahoo News

This is probably Yahoo! Japan’s best bet for the future, I think. Good news is good. I don’t actually read Yahoo! Japan’s news, but I really do hope that it’s nothing like Yahoo! America’s news page. I really don’t need to know about the Kardashians every other news story.

Advertising

This is Yahoo! Japan’s bread and butter. It’s where all the money comes from (kind of like with Google in America). One thing I’ve noticed about Japanese users of the Internet is that they click on ads a lot. This reminds me of American Internet users ten years ago, actually. Over time we’ve become trained and have become more savvy. We know what’s an ad and what’s not. Fewer mistakes, which means we don’t click on ads as much as before.

The Japanese public hasn’t been on the desktop Internet for as long as we have (they are much more into mobile). When they become more savvy, I think we’ll see less and less ad clicks, causing revenues for Yahoo! Japan to go down. Perhaps they will continue to hold on to the advertising market and become the Google of Japan (if they’ aren’t already that). Perhaps Google will sweep in and upend Yahoo! Japan. We’ll find out soon, I’m sure.

Do They Have A Chance?

Probably. I’m just spouting out my opinion here and am almost certainly wrong on every account. Still, all I can see in Yahoo! Japan is Yahoo! America ten or so years ago. Things were looking alright and things were bright… then all of a sudden, boom! Yahoo goes down in a burst of fire.

I think really it’s going to come down to the culture of the users. American Internet users and Japanese Internet users are very different. Perhaps this could dictate the direction in which Yahoo! Japan goes. Will it go up, up, up? Maybe. Will it eventually fall? Almost certainly. My guess is that it will fall sooner, rather than later, but that’s up to the people using it. I will admit that Yahoo! Japan is infinitely more useful than Yahoo! America, but I also think that’s because of the lack of competition. Once competition starts injecting itself into the equation, which I think will happen soon, Yahoo! Japan will follow in its older brother’s footsteps. Hopefully more gracefully, though.

Of course, they could always hire on Hard Gay as their CEO if things go sour. I hear hiring and losing CEOs is the best way to make your company great again, ammiright Yahoo! America?

“They probably sometimes use their name to shout their excitement at all the yens they’ve amassed. Yahoooooo!”

i don’t think you could have possibly written that sentence without thinking ハードゲイ。

http://www.tofugu.com koichi

SEI SEI SEI

http://www.roastedkeyboard.com/ Roasted Keyboard

haha I love this! Yahoo! F…. er I mean Japan FTW! :D

http://www.roastedkeyboard.com/ Roasted Keyboard

LOL at the hard gay reference! I remember seeing that in some drama with Seto Koji but what is the cultural significance?

Youchi

I normallly visit Yahoo.co.jp for their dictionaries, which are pretty helpfull, since they have also monolingual ones. And I have a mailaccount there, but nowadays I don’t use it much.

http://www.tofugu.com koichi

フォー！！

Paladin341

ヤァフゥゥゥゥゥ！

kuyaChristian

I remember watching that Hard Gay Yahoo! video back in 2007 :P Good times, good times.
Since the Internet culture in Japan and America are different, will I get a [internet] culture shock if I go to Japan? :O

Justinpskeen

the highest rated comments on yahoo articles always have more sense than the idiots that write them.

http://www.tofugu.com koichi

Maybe only if you spend all your time in manga cafes, hahaha

Missingno15

Yeah when I was shoulder surfing my Japanese friends, their primary homepage was in fact, Yahoo! JP. Not just that, its their main source of news and their main search engine from what I observed. I didn’t say anything to them, but we Westerners kinda feel more comfortable using Google as our search engine.

And using my friends as an example, they also didn’t seem amazingly tech savvy either. Just enough to know how to work everything. So rather than exploring the other sites and options on the internet, they could just rely on Yahoo! JP to do basically everything for them which is where I agree with you concerning about Yahoo! JP’s future depending on its user base.

Small thing about the Kim Kardashian thing, I’m sure Japanese people feel the same way about the slew of idol groups prevalent in Japan lolololol. One thing that doesn’t change between the both of them is the rabid commenters. 毒舌 enough to make one want to kill oneself

Koichi, One thing Hard Gay for CEO! Good memories watching videos of him on YouTube way back far.

mitsuho32

See why Yahoo! JP wins? They partnered with Google, and Google always wins…

http://espo.in/ Jonas

Yahoo! Japan is just one of many examples, HMV and Tower Records are two other companies where we see similar results. I’m merely guessing but the way I see it is that the American and European companies tend to innovate, and when that doesn’t work, there’s nothing but bankruptcy waiting for them. While the Japanese companies of this scale tend to take the economical route and invest in safer options and work on further establishing their name in order to get those long-term customer relationships.

SF

They are not on JASDAQ anymore. They moved to TSE first section years ago.

Oh, don’t forget yahoo Japan finance is pretty big for them.

http://www.tofugu.com koichi

ty! All fixed.

http://mistersanity.blogspot.com Jonadab

I think I agree with most of your analysis.

As near as I can determine, the major mistake Yahoo made in America (not that they didn’t make a whole collection of them, but this IMO is the biggie) was an apparently deliberate decision, some time around 1998, to cater all of their services primarily for people who don’t understand the internet AT ALL. The problem is, while there were a ton of people like that getting on the internet in the late nineties, there aren’t really so many now, especially in the English-speaking world. Oh, sure, there are still millions of people who don’t know anything about the internet, but they’re not getting on the internet and trying to use it like most of the people who didn’t understand the internet in 1998 were doing. The people who still at this point don’t know anything about the internet are steadfastly not buying internet service (or even computers, in many cases), so they don’t constitute a useful market for Yahoo. Meanwhile, the people who didn’t know anything about the internet in 1998 but were using it anyway have learned and moved on, for the most part. (Many are still holding onto old Yahoo Mail accounts because they don’t want to change addresses or lose all their old mail, but that’s not a viable business model in the long term. Nobody’s creating *new* Yahoo Mail accounts except to use one time as throwaways.)

Facebook appears to have made a similar mistake, catering almost willfully to people who don’t understand social networking very well and haven’t really learned to manage their priorities, time, contacts, and privacy. This hasn’t hurt them yet. I believe it will.

http://www.tofugu.com koichi

I think this is it – catering to the current generation but not thinking forward. Gets hard when your company gets large, I know, but some big companies can still pull off the forward thinking things despite this, so it can be done. Good analysis!